The British Pound finally broke upside after over 4-weeks of sideway range move. The following GBPUSD Elliott wave analysis looks at the next significant levels to watch out for.
December 05, 2019 | AtoZ Markets – GBPUSD broke above the 1.3 handle on Wednesday. The current surge started in late November as the polls were all in for the conservatives. The geopolitical interests of the US have also weighed heavily on the buck thereby lifting this currency pair to its highest in five weeks. The Cable has now gained over 2% (300 Pips) since November 27. The first target remains at 1.317 which is about 30 pips away from the current price level. Meanwhile, the London session on Thursday has continued the bullish direction. The price is now a few pips away from 1.3150.
Brexit update: the latest on UK election polls
The Conservatives are still having a clear lead in the polls. The party leader, PM Boris Johnson has refused to decline the option of exiting the EU without a deal or on WTO terms. The Brexit minister Dominic Raab earlier talked about the necessity to prepare a ‘no-deal’ package in the trade talks with US and others. When asked questions related to Raab’s comment, the PM refused to give a direct answer each time repeating the rhetoric – ”we have a great deal which will allow us to come out smoothly and efficiently on 31 January”.
Meanwhile, the opposition Labour party continues to warn over a post-Brexit deal with the US which the latter might want to include the NHS. However, US President Trump while on a visit to the UK to attend the NATO summit said the US will not include the NHS in any trade talks.
As more geopolitical headlines continue to fly in, the market will continue to react. At the moment, the conservatives are having an upper hand which the market reads as pro-Brexit. However, any comment of no-deal Brexit from the PM might hamper the bullish development before the elections later in December.
GBPUSD Elliott wave analysis: December 5 update
Technically, GBPUSD is bullish. From 1.196, the market has been emerging into a bullish impulse wave. The 4th wave of the rally ended at 1.282 with a triangle pattern which we have mentioned in previous updates. In the last update, the price broke slightly above the triangle and stabilized just below the 1.3 critical psychological level. This was a signal that the price will eventually break out toward our bullish targets. The new chart below shows that the price has finally broken away and now heading to the first target at the 38.2% (1.317) Fibonacci extension of wave (i)-to- (iii) from (iv) (Charting tools from TradingView).
Wave (v) is expected to be extended given how short wave (iii) ended. As a result, the current rally could extend to 1.342 (61.8% Fibonacci extension level) or even 1.382 (100% Fibonacci extension level). At the moment, we will see how the price will react at 1.317. However, giving the current political structure, it seems that blasting above this level won’t be very difficult for the Cable unless there are surprises.